In re Pastran

• Decision Date: 21 November 2011
• Docket Number: No. 06–34728–SGJ–13.,06–34728–SGJ–13.
• Citation: 462 B.R. 201
• Parties: In re Yelitza Jean PASTRAN, Debtor.
• Court: U.S. District Court — Northern District of Texas

462 B.R. 201

In re Yelitza Jean PASTRAN, Debtor.

No. 06–34728–SGJ–13.

United States Bankruptcy Court, N.D. Texas, Dallas Division.

Nov. 21, 2011.

Theodore Ohmsteade Bartholow, Jr., Bartholow & Bartholow, Dallas, TX, for Debtor.

AMENDED MEMORANDUM OPINION AND ORDER GRANTING APPLICATION OF CHAPTER 13 DEBTOR'S COUNSEL FOR ALLOWANCE OF COMPENSATION AND REIMBURSEMENT OF EXPENSES, BUT DENYING FEE–SHIFTING REQUEST [DE 84 & 100] ¹

STACEY G.C. JERNIGAN, Bankruptcy Judge.

Before this court is the Application of Chapter 13 Debtor's Counsel for Allowance of Compensation and Reimbursement of Expenses [DE # 84] and the Supplement thereto [DE # 100] (collectively, the “Compensation Application”). The Compensation Application is not a typical fee application, that merely seeks an award of attorney's fees and expenses, payable from the Debtor's bankruptcy estate.² Rather, the application contains a request for fee shifting. Specifically, Debtor's counsel not only seeks an award of $29,177.50 in fees and $814.95 in expenses, pursuant to 11 U.S.C. § 330 (reimbursable from the Debtor) but, more significantly (and really primarily), seeks reimbursement for attorney's fees and costs from two mortgage loan servicers and the law firm who represented them in connection with certain motions to lift stay they filed, which motions were allegedly lacking in foundation and caused needless fees to be incurred by the Debtor. The authority cited by the Debtor for the fee shifting is 28 U.S.C. § 1927, 11 U.S.C. § 105(a), and the court's inherent authority.

The court has core jurisdiction in this matter pursuant to 28 U.S.C. §§ 1334 and 157(b)(2)(A), (G) and/or (O). For the reasons stated below, the court is granting the Compensation Application, but is denying the request for fee shifting. This memorandum opinion constitutes the court's findings of fact and conclusions of law pursuant to Federal Rules of Bankruptcy Procedure 7052 and 9014. Where appropriate, a finding of fact will be construed as a conclusion of law and vice versa.

I. FINDINGS OF FACT

1. On November 3, 2006, the Debtor filed a voluntary petition under chapter 13 of the Bankruptcy Code.

2. The Debtor has a homestead at 309 Shelly Circle, Irving, Texas, 75061 (the “Homestead”), which is encumbered with an Adjustable Rate Note and Deed of Trust (for simplicity hereafter, the “mortgage loan”).

3. The Debtor's Bankruptcy Schedules indicated that she was behind in payments on her Homestead mortgage loan at the date of the filing her bankruptcy petition-estimating that she was approximately $5,154 in arrears. The Debtor listed AMC Mortgage Services as the secured creditor on the Homestead mortgage loan [DE # 1, Schedule D].

A. AMC as Servicer for Argent

4. On November 22, 2006, the entity AMC Mortgage Services, Inc. (“AMC”), filed a Proof of Claim in respect of the Homestead mortgage loan in this case. AMC indicated in the Proof of Claim that it was a loan servicer for the actual secured creditor Argent Mortgage Company, LLC (“Argent”). See Proof of Claim No. 1 on the Official Claims Register of the Bankruptcy Clerk.

5. Apparently, this Proof of Claim contained an error, in that AMC was servicing the mortgage loan for Deutsche Bank National Trust Company (“Deutsche”), as Trustee, in Trust for the Registered Holders of Argent Securities, Inc., Asset–Backed Pass–Through Certificates, Series 2004–W9, not Argent.

B. Citi as Servicer for Deutsche

6. In any event, at some point post-petition, Citi Residential Lending, Inc. (“Citi”) took over servicing the Homestead mortgage loan from AMC. Additionally, at some point, the Debtor stopped making post-petition payments on her mortgage loan.

7. On March 14, 2008, the law firm of Hughes, Watters & Askanase, LLP (“HWALLP”) filed a Motion for Relief from Stay (the “Citi Stay Lift Motion”) [DE # 41], on behalf of Citi, as Loan Servicer for Deutsche, seeking permission for Citi to exercise contractual and state law remedies as to the Homestead mortgage loan. At this juncture, no notice of transfer of claim had been filed in the case, transferring the claim in respect of the Homestead mortgage loan from AMC to Citi. Moreover, the copy of the mortgage loan note attached to the Citi Stay Lift Motion was unindorsed and there was no assignment or other chain of title documentation showing that the note was payable to anyone other than the original Lender, Argent. The Debtor questioned Citi's standing.

8. On April 30, 2008, approximately six weeks after the Citi Stay Lift Motion was filed, a Notice of Transfer of Claim was filed, indicating that the AMC proof of claim in respect of the Homestead mortgage loan had been transferred or assigned to Citi pursuant to an “Assignment Agreement” (not attached-nor was any other chain of title documentation). Then, on June 19, 2008, just days prior to a final hearing on the Citi Stay Lift Motion, HWALLP withdrew the Citi Stay Lift Motion. The court heard reports of the withdrawal at a subsequent hearing held on June 23, 2008.

C. AHMSI as Servicer for Deutsche

9. On March 29, 2009, many months later, Citi filed a Transfer of Claim Other Than for Security [DE # 56], this time effectively transferring the servicing of the Debtor's loan to yet another entity, American Home Mortgage Servicing Inc. (“AHMSI”).

10. On July 2, 2009, AHMSI filed its own Motion of American Home Mortgage Servicing, Inc., as Attorney–in–Fact and Servicer–in–Fact for Deutsche Bank National Trust Company, as Trustee in Trust for the Benefit of the Certificate Holders for Argent Securities Trust 2004–W9, Asset–Backed Pass–Through Certificates, Series 2004–W9 for Relief from the Automatic Stay of an Act Against Property of 11 U.S.C. § 362 Regarding 309 Shelly Circle, Irving, Texas 75061; and (b) the Motion of American Home Mortgage Servicing, Inc., as Attorney–in–Fact and Servicer–in–Fact for Deutsche Bank National Trust Company, as Trustee in Trust for the Benefit of the Certificate Holders for Argent Securities Trust 2004–W9, Asset–Backed Pass–Through Certificates, Series 2004–W9 for Relief from the Automatic Stay of an Act Against Co–Debtor of 11 U.S.C. § 1301 (collectively, the “AHMSI Stay Lift Motions”) [DE 58 & 59].

11. The court held a final hearing on the AHMSI Stay Lift Motions on February 1, 2010 (the “Final AHMSI Hearing”). Certain post-trial briefing was subsequently submitted [DE 75 & 76], when thorny standing and evidentiary issues percolated to the surface during the Final AHMSI Hearing.

12. On July 13, 2010, the court issued a Memorandum Opinion and Order ultimately denying the AHMSI Stay Lift Motions (the “Opinion”) [DE # 80]. ³ The Opinion contains a detailed discussion of the thorny standing and evidentiary problems that surfaced at the Final AHMSI Hearing. Specifically, the court found that AHMSI failed to meet its evidentiary burden at the hearing of establishing it had actual standing to pursue collection remedies under the mortgage loan note as either the holder or owner ( i.e., servicer or lender) of the note. First, AHMSI had not attached documents to the AHMSI Stay Lift Motions to show chain of title and holder status. Then, at the Final AHMSI Hearing, AHMSI showed up with a different version of the mortgage loan note than had been attached to the AHMSI Stay Lift Motions, which was indorsed in blank. However, AHMSI's lawyer did not move to have it admitted into evidence. Moreover, the AHMSI witness was not able to competently testify from personal knowledge regarding holder or chain of custody issues. In denying the AHMSI Stay Lift Motions, the court indicated that the denial was without prejudice to AHMSI refiling a motion and adequately proving up its holder status. Additionally, the court found that the court's ruling was without prejudice to the Debtor seeking reimbursement for its attorney's fees and costs in defending the AHMSI Stay Lift Motions.

13. On September 13, 2010, counsel for the Debtor, Theodore O. Bartholow, III (“Debtor's Counsel”), filed an Application of Debtor's Counsel for Allowance of Compensations and Reimbursement of Expenses (the “Original Application”) [DE # 84], which requested that the court award him $29,177.50 in attorney's fees and $814.95 in expenses for work performed in connection with the defense of the Citi Stay Lift Motion and the AHMSI Stay Lift Motions. To be clear, the Original Application not only requested approval of such fees as reasonable and necessary under Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717–719 (5th Cir.1974) and Am. Benefit Life Ins. Co. v. Baddock (In re First Colonial Corp. of Am.), 544 F.2d 1291, 1299 (5th Cir.1977), cert. denied, 431 U.S. 904, 97 S.Ct. 1696, 52 L.Ed.2d 388 (1977), but it also requested an order directing that Citi, AHMSI and HWALLP pay these fees and expenses, effectively shifting the burden to pay from the Debtor to Citi, AHMSI and HWALLP.⁴

14. On October 13, 2010, this court held a hearing on the Original Application. At the hearing, the court expressed concerns about adequate and proper notice being given to all parties of the fee-shifting aspect of the Original Application. The court then instructed counsel for the Debtor to file a supplement to the Original Application disclosing the exact fee shifting-allocation being requested as to various parties (and counsel) and also disclosing the legal authority being relied upon.

15. On February 25, 2011, the Debtor filed a Supplement to Debtor's Application for Compensation (the “Supplement”) [DE # 100]. The Supplement asserted that “neither the Citi or AHMSI motions for relief should have been filed because the motions lacked foundation in fact or law because Citi, AHMSI and their counsel, HWALLP, knew or should have known that they lacked foundation.” ⁵ As such, Debtor's Counsel contended that all of the Debtor's attorney's fees and costs incurred in the defense of the AHMSI Stay Lift Motions and the Citi Stay Lift Motion were incurred needlessly and that...